Key Moments
- ING’s Warren Patterson replaces an earlier assumption of a two-week Strait of Hormuz disruption with scenarios that keep severe interruptions in place through the end of March or longer.
- The new base case (Scenario 1) assumes no resumption of Strait of Hormuz flows until the end of March, with only a gradual normalization during the second and third quarters.
- Alternative scenarios range from a quicker recovery with near-normal supply by May, to a prolonged disruption driven by ongoing conflict and continued vessel attacks.
Revised Outlook for Global Energy Markets
ING’s Warren Patterson has substantially revised his central assumptions for the global Energy complex, moving away from an earlier view that disruptions in the Strait of Hormuz would last only about two weeks. The updated framework now contemplates severe disruption extending into late March or beyond, with the recovery in energy flows occurring only gradually through the second and third quarters.
From Short-Lived Shock to Extended Disruption
“At the start of the war, in our base case we assumed a two-week full disruption to energy flows through the Strait of Hormuz and then a gradual recovery over the remainder of March, which would have led to near-normal flows by April. That was clearly too optimistic, with us now in the third week of the conflict and no signs of energy flows resuming. We have therefore had a hard rethink of our scenarios, along with our base case.”
The earlier base case was built on a relatively swift normalization of flows. With the conflict now in its third week and transit through the Strait still halted, ING has reworked its scenarios to reflect a more persistent supply interruption and a slower path back toward normal trade volumes.
Scenario 1: New Base Case – Recovery Pushed Into Q2 and Q3
“In our new scenario 1, which is our base case, we assume that Strait of Hormuz flows remain cut off until the end of March, which corresponds with the view that intense combat between the US-Israel and Iran continues until the end of the month. This is followed by lower intensity strikes, along with more signs of diplomacy, which start to allow for a gradual recovery in energy flows in the second quarter.”
Under this central scenario, energy infrastructure and supply chains begin to recover only after intense hostilities ease. Patterson notes that the restart of production and processing facilities will take time:
“Over this time, upstream production, refineries and LNG facilities start to slowly ramp up as storage constraints start to ease. However, it would only be by the start of the third quarter that we see a return to near-normal flows. This is assuming that available pipeline capacity continues to be used for some oil to bypass the Strait of Hormuz.”
| Scenario | Disruption Duration (Strait of Hormuz) | Assumed Conflict Intensity | Timing of Near-Normal Flows |
|---|---|---|---|
| Scenario 1 (Base case) | Flows cut off until end of March | Intense combat until end of March, then lower intensity with more diplomacy | Near-normal flows by the start of the third quarter |
| Scenario 2 (Most optimistic) | Almost fully disrupted until end of March | Improving conditions that allow gradual flow recovery in April | Near-normal supply by May |
| Scenario 3 (More aggressive) | Prolonged disruption due to continued attacks | War intensity continues into April, followed by lower-grade confrontation and limited diplomacy | Prolonged impairment of flows, with no clear normalization timing |
Scenario 2: Most Optimistic Path – Near-Normal Supply by May
“Our new scenario 2 is our most optimistic scenario, where we assume that energy flows through the Strait of Hormuz remain almost fully disrupted until the end of March and gradually improve in April. This would allow supply to be back to near normal by May.”
This upside case still acknowledges a significant interruption through the end of March but anticipates that repair, logistics, and diplomatic efforts support a quicker restoration of flows and infrastructure capacity during April.
Scenario 3: Prolonged Risk Under Continued Conflict
“Our new scenario 3 is our more aggressive scenario, where the intensity of the war continues into April, followed by a lower-grade confrontation for the foreseeable future, while there are few signs of diplomacy. Continued attacks on vessels navigating the Strait of Hormuz mean energy flows remain disrupted for a prolonged period.”
In this downside scenario, sustained hostilities and ongoing threats to shipping lanes prevent energy markets from regaining equilibrium, keeping flows impaired for an extended time and heightening supply risk far beyond March.
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